Former Theranos Inc. Chief Executive Officer Elizabeth Holmes should spend 15 years in prison for committing one of the most serious white-collar crimes in Silicon Valley history, prosecutors told the judge who will sentence her.
In a request filed late Friday by the U.S. Attorney’s Office in San Francisco, prosecutors injected a new element into the closely watched case: a recommendation that Holmes, 38, be ordered to pay full restitution to her investors, including Walgreens Boots Alliance Inc. and Safeway Inc. — sums adding up to more than $800 million.
Duping novice and sophisticated investors alike, Holmes was “blinded by ambition,” prosecutors said in a court filing. The founder of the blood-testing startup that reached a peak valuation of $9 billion before collapsing in ruins in 2018 operated in a “reality distortion field,” in which her pursuit of fame, adoration and billions of dollars of wealth justified forgery and deceit that put patient safety at risk, the government said.
“Holmes often seized upon investors’ desire to make the world a better place in order to lure them into believing her lies,” prosecutors said. “She stands before the court remorseless. She accepts no responsibility. Quite the opposite, she insists she is the victim.”
The government’s sentencing memo sets the stage for a final showdown Nov. 18 in federal court in San Jose, California, before U.S. District Judge Edward Davila.
Holmes’ own lawyers say she should be spared from prison and sentenced to home confinement and community service so she can continue her volunteer work counseling sexual-assault victims that she began in recent months. Her lawyers argued that if Davila finds incarceration is required, a term of 18 months is sufficient, followed by supervised release.
The government’s memo reprises many of the most sensational revelations at Holmes’ trial, including when she admitted to adding the logos of pharmaceutical giants without permission on reports to prospective investors. They also pointed to instances when she falsely boasted Theranos devices were being used by the U.S. military in combat.
Investor and patient victim statements are laced throughout the memo. Holmes’s lies about Theranos contracts with the Department of Defense were designed to “prey upon investors’ reverence for our servicemen and servicewomen in the Armed Forces,” investor Craig Hall said. “Simply put, Holmes’s actions were loathsome and un-American.”
Holmes’s scheme to defraud patients should be also weigh against her, even though she was acquitted of those charges, prosecutors said. Pointing to a sentencing recommendation from the U.S. Probation Office, the government said Holmes should serve more prison time due to her role as leader of the “extensive criminal activity that occurred in connection with the company she founded.”
Prosecutors included a list of investors, with a particular focus on Walgreens, Safeway and the late George Shultz, the former U.S. Secretary of State who served on the Theranos board and whose grandson worked at the company and was a whistleblower. Shultz’s family submitted a victim impact statement, prosecutors said. Holmes should provide restitution to investors who suffered a total loss of $803,840,309, according to the filing.
Holmes has “modest assets” outweighed by $450,000 in loans for her civil settlement with securities regulators and more than $30 million in liabilities for legal fees, prosecutors said. The U.S. Probation Office reported that Holmes’s family “appears to have substantial assets,” and that the former CEO “is managing her affairs to avoid subjecting their assets to any judgment in this case.”
Davila should consider whether that “reflects a genuine desire to make her investors whole,” prosecutors said.
